one of the objections to solar power (by which i mean photovoltaics converting sunlight into electricity) are that the energy density is too small to replace conventional power plants. that may well be true, but nobody is talking about replacing conventional power plants overnight. it is a matter of coexistence between today's generating plants and the new technology.
an excellent example in real life is the emergence of the hybrid automobile. it is not displacing conventional cars but will slowly increase its market share as oil prices remain at historic highs. the same will happen to solar power devices as well: they will emerge where they make sense, in smaller applications. they probably will never completely displace coal-fired or oil-fired or nuclear-powered electricity plants.
but there is another observation that needs to be taken into account: that of low-end technologies that rapidy become substitutes for high-end technologies, if the innovation curve is steep enough. the low-end stuff that appears almost toy-like, completely unable to solve the problems high-end products are able to tackle: that is quintessentially what a new innovation typically looks like.
however, in some instances, the low-end product can become more and more powerful quickly so that it soon starts becoming an adequate replacement for the high-end products, which are not evolving quite as rapidly, partly because they are the incumbent. this has happened in the computer industry where the mini-computer and then engineering workstations and finally the PC have all marched rapidly up the value curve and shoved the incumbent products aside.
at the moment, it is not clear that solar power falls into this category where innovation drives a rapid rise up the curve. it probably does not, and that might be a result of the fact that most western countries, not being rich in solar power, are not putting much effort into developing photovoltaics, as that is not going to lead to much demand in their (rich) nations. this is analogous to pharmaceutical companies not spending research money on tropical diseases, instead concentrating on drugs for more lucrative diseases such as cancer, diabetes, high cholesterol, etc which have readier in their home countries.
but if developing countries such as india take more interest and actually invest money, it is likely that solar energy will become a big factor. this would have a lot of benefits for india: getting off the crack-like addiction that the west has for oil; perhaps increased investment into public transport rather than cars; the reduction in the import bill for oil; and indirectly the reduction in the funds that flow to pakistan from the arab world for terrorism against india.
here's some information from wired magazine about solar energy: